AutoZone 2014 Annual Report Download - page 83

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location and convenience; price; and the strength of our AutoZone brand name, trademarks and service marks,
some of our competitors may gain competitive advantages, such as greater financial and marketing resources
allowing them to sell automotive products at lower prices, larger stores with more merchandise, longer operating
histories, more frequent customer visits and more effective advertising. With the increasing use of digital tools
and social media, our customers are quickly able to compare prices, product assortment, and feedback from other
customers before purchasing our products either online, in the physical stores, or through a combination of both
offerings. If we are unable to continue to develop successful competitive strategies, or if our competitors develop
more effective strategies, we could lose customers and our sales and profits may decline.
We may not be able to sustain our historic rate of sales growth.
We have increased our store count in the past five fiscal years, growing from 4,417 stores at August 29, 2009, to
5,391 stores at August 30, 2014, an average store count increase per year of 4%. Additionally, we have increased
annual revenues in the past five fiscal years from $6.817 billion in fiscal 2009 to $9.475 billion in fiscal 2014, an
average increase per year of 8%. Annual revenue growth is driven by the opening of new stores and commercial
programs and increases in same store sales. We open new stores only after evaluating customer buying trends and
market demand/needs, all of which could be adversely affected by persistent unemployment, wage cuts, small
business failures and microeconomic conditions unique to the automotive industry. Same store sales are impacted
both by customer demand levels and by the prices we are able to charge for our products, which can also be
negatively impacted by the economic pressures mentioned above. We cannot provide any assurance that we will
continue to open stores at historical rates or continue to achieve increases in same store sales.
Consolidation among our competitors may negatively impact our business.
Recently some of our competitors have merged. Consolidation among our competitors could enhance their market
share and financial position, provide them with the ability to achieve better purchasing terms and provide more
competitive prices to customers for whom we compete, and allow them to utilize merger synergies and cost
savings to increase advertising and marketing budgets to more effectively compete for customers. Consolidation
by our competitors could also increase their access to local market parts assortment. These consolidated
competitors could take sales volume away from us in certain markets, could cause us to change our pricing with a
negative impact on our margins or could cause us to spend more money to maintain customers or seek new
customers, all of which could negatively impact our business.
If we cannot profitably increase our market share in the commercial auto parts business, our sales growth
may be limited.
Although we are one of the largest sellers of auto parts in the commercial market, we must effectively compete
against national and regional auto parts chains, independently owned parts stores, wholesalers and jobbers in order
to increase our commercial market share. Although we believe we compete effectively in the commercial market
on the basis of customer service, merchandise quality, selection and availability, price, product warranty,
distribution locations, and the strength of our AutoZone brand name, trademarks and service marks, some
automotive aftermarket jobbers have been in business for substantially longer periods of time than we have, have
developed long-term customer relationships and have large available inventories. If we are unable to profitably
develop new commercial customers, our sales growth may be limited.
A downgrade in our credit ratings or a general disruption in the credit markets could make it more
difficult for us to access funds, refinance our debt, obtain new funding or issue securities.
Our short-term and long-term debt is rated investment grade by the major rating agencies. These investment-grade
credit ratings have historically allowed us to take advantage of lower interest rates and other favorable terms on
our short-term credit lines, in our senior debt offerings and in the commercial paper markets. To maintain our
investment-grade ratings, we are required to meet certain financial performance ratios. A change by the rating
agencies in these ratios, an increase in our debt, and/or a decline in our earnings could result in downgrades in our
credit ratings. A downgrade in our credit ratings could limit our access to public debt markets, limit the
institutions willing to provide credit facilities to us, result in more restrictive financial and other covenants in our
10-K